OIL & GAS MARKETS • DEPARTMENTS
Wood Mackenzie: Continued consolidation, caution
around upstream spending among key trends in 2024
Key themes to watch for in glob-
al and corporate upstream this year,
Upstream investment by region
according to a new report from Wood
Mackenzie, include continued consoli-
dation, increased activity from national
600 oil companies (NOCs), reversing decar-
tion multiples, easier access to finance
for larger companies, lower costs and
better execution are some of the incen-
tives. “For deals to work, they need to
demonstrate improved
operational, financial and, for some deals, emis-
sions performance,” said Fraser McKay,
Head of Upstream Analysis for Wood
Mackenzie. NOCs: COP28 has placed greater
US$ billion
playbooks and an upstream investment
Consolidation: Higher market valua-
The global land drilling rig market is
Middle East
Russia and Caspian
Europe Oceania a
Oceani ambitions in low carbon and emissions
abatement . However, upstream growth
will still be on the agenda for most
NOCs .

The Middle East will lead much of the
growth, with ADNOC, Saudi Aramco and
Kuwait Petroleum Corp increasing their
spend to meet domestic capacity targets .

They may also target more merg-
ers and acquisitions . “The NOCs have
reset financial strength and will target
M&As to plug strategic gaps in gas, LNG,
short-cycle oil and international explo-
ration,” said Neivan Boroujerdi, Director,
Corporate Research and NOC Lead .

Decarbonization: Wood Mackenize
forecasts production will rise by 3% in
2024, and decarbonization won’t keep
up. Upstream scope 1 and 2 emissions
will increase by 12 million tonnes of CO 2 e
year-on-year. Shifts in strategic playbooks: There
will also be continued adjustments to
the strategies of oil and gas compa-
totaling an estimated 4,559 in 2023, accord-
4% increase compared with 2022 and 32%
compared with the low point of 2020.

300 Westwood also forecast that global land
drilling rig demand will average 4,718
2000 20
units between 2023 and 2027.

On a regional level, China is forecast to
100 lead the demand, accounting for 28% of the
2020 2021
2022 2023
2024 Source: Wood Mackenzie Lens Upstream
The Middle East will continue to be a
drilling hotspot this year, driven by an
increase in upstream spending.

global total. The country will continue to
drill deeper wells in shale gas plays and
increase activity on mature fields as part
of efforts to increase domestic production.

In the Middle East and North Africa,
demand from the Gulf Cooperation Council
(GCC) countries is forecast to grow by almost
emphasis on sustainability plans. The
effect for some NOCs will be bigger
in 2020 and 2021, with demand for rigs
December rig market forecast. That is a
4000 40
0 continuing to recover from the lows seen
ing to Westwood Global Energy Group’s
5000 50
bonization gains, shifts in strategic
plateau. North America
Asia Latin America
Africa Westwood forecasts positive
outlook for global land rig
demand through 2027
have to grow cash flow if they want
to grow dividends, rebalancing capital
allocation toward investment to main-
tain sustainable cash-generating busi-
nesses.” Upstream investments: Operators will
remain focused on resilience, sustain-
ability and efficiency. Most will exercise
caution in the face of inflation, bottle-
necks and price uncertainty, with con-
fidence undermined by widening OPEC+
production cuts. Global spend in 2024
will reach just over $500 billion , up just
2% from 2023 after a rise of 18% over the
past three years, all in real terms .

“Investment will rise in the Middle
East but fall in the US Lower 48,” said Ian
Thom, Director of Upstream Research.

“The new project pipeline remains
healthy, with 45 projects vying to take
final investment decision – a potential
investment commitment of $170 billion
to develop 25.5 billion BOE. Around 30
will proceed in 2024. Many of these will
50%. In Latin America, meanwhile, many
countries are expected to see declines.

Argentina will be the exception there, with
development of the Vaca Muerta Shale Basin
continuing to support increased demand.

In the US, the outlook is relatively flat,
as operators continue to prioritize capital
discipline. In Russia, the outlook remains negative
due to the impact of Western sanctions
stemming from the Ukraine conflict.

While the overall market outlook is gen-
erally positive, utilization is still a rela-
tively weak 52%, reflecting the contin-
ued oversupply in the market. The global
capable land rig fleet was estimated to be
approximately 9,000 as of November.

However, demand for high-horsepower
rigs (2,000-hp or more), which account for
less than 1,400 of the total capable rig fleet,
is expected to be strong in regions like
China and the GCC countries. Westwood
believes there is potential for these regions
to be undersupplied with high-spec rigs in
the later years of the forecast.

nies, driven by sustainability concerns,
be deepwater discoveries, with the 10
And it won’t just be in those regional
stakeholder pressures and low valua-
biggest deepwater oil projects requiring
hotspots where high-spec rigs will be in
tion multiples . “Investors want a reli-
$52 billion of investment for recoverable
high demand , as operators will continue to
able, growing base dividend as a reward
resources of 5 billion barrels of oil.”
drill more complex wells while aiming to
for rising energy transition risks,” said
Global economic weakness or a loss
maximize value from each well. This will
Tom Ellacott, Senior Vice President of
of unity in OPEC+ are key investment
mean more positive outlooks for contrac-
Corporate Research . “But companies will
wildcards. tors with high-spec rigs in their fleets.

D R I LLI N G CO N T R ACTO R • JAN UARY/FEB RUARY 2024
11